6 Marketing Mix

Kulbhushan Chandel

1. Learning Outcome:

After completing this module the students will be able to:

• Understand the concept of marketing mix

• Explain various components of marketing mix

• Describe policies of pricing.

• Understand product-mix, place-mix and promotion-mix.

2. Meaning of marketing mix

The term ‘marketing mix’ was coined by Neil H. Bordan. It means the combination of firm’s inputs which form the core of its marketing system i.e. the product, the price structure, the distribution system and the promotional activities. Marketing mix comprises of important elements which constitute the marketing programme of an organisation and forces that influence its marketing activities and programmes. The marketer adjusts his marketing programs as per the external forces so as to develop a mix or programme that can achieve marketing objective.

3. Elements of marketing mix

The term marketing mix has been popularized by the marketing experts in terms of four P’s and accordingly the elements of marketing mix has been classified as follows:-

• Product

• Price

• Place (Distribution)

• Promotion

Each element of marketing mix comprises of certain sub variables. These major element of marketing mix and their sub variables have been explained as below:

3.1 Product

Product is one of the important components of marketing mix. It is the starting point of all marketing operations. It is bundle of satisfaction than physical object only. Product is considered as the sum total of physical and psychological satisfaction it gives to buyer. Product includes not only tangible attributes like design, package, label, color but also includes intangible or psychological attributes such as prestige of manufacturers, warranty, credit and delivery terms. The term product extends to tangible products like scooter, toothpaste as well as to intangible products i.e. services such as banking, insurance, repairing etc.

Product is the core ingredient of marketing mix. Without a product, there is nothing to price, promote or distribute. Product is the vehicle through which company provides consumer satisfaction. It represents bundle of expectations to consumers and society. Marketing managers are required to take crucial decisions regarding the product of the company so that it will be accepted by the target market.

The term ‘product mix’ refers to the entire range of products which a company offers for sale. It has three dimensions i.e. (i) width, (ii) depth (iii) consistency which need special attention in effective marketing management. ‘Width’ of product mix refers to the number of product lines offered by the company. The term ‘depth’ means number of product items within each product line. ‘Consistency’ means how closely related the different product lines are in end use, distribution channels, and product requirements. Thus, there will be consistency when products have research affinity, marketing affinity and production affinity.

It is important to mention here that product mix may consist of unrelated products. For example, Hindustan machine tools offer product mix with diverse range of products like tractors, machine tools, watches etc.

The product mix includes the following variables:

• Product quality, features, design, colour, size, line and range

• Diversification and simplification of product lines

• Branding, packaging, labelling

• After sales services

Thus product mix decisions extend to above mentioned areas. It involves decisions regarding product design, product line, branding, packaging, labelling and after sales services.

Product design : The marketing decisions start with designing the product as per requirement of target market. The colour and line of products are planned to provide beauty and functional utility. Design is the major selling feature of all products. Good design provides attractiveness, safety, utility, ease of operation and advertising feature. Product design is influenced by production capacity, available capital, use, external appearance required and service requirements.

Product line simplification: It means eliminating from product line those products which provide no incentive to company to continue their production. A company can go for simplification in case of decreasing marketing share, increasing promotional budgets, decreasing sales volume as a percentage of firms’ total sales or increasing variable costs as compared to revenue. The managers must chalk out a proper simplification programme focusing on right timing of product elimination without causing much disturbance to existing customers, keeping stock of repair parts to provide services for most recent sales, managing core demand tactfully and selling the stock of discontinued product in phased manner.

Diversification: Diversification means increasing the number of products in product portfolio of the organisation. Many companies in India have diversified their product lines and added heterogeneous product in their product portfolio such as Hindustan Machine Tools Ltd. with diversified products like wrist watches, tractors, printing machines and lamp making machines etc. A company can opt for diversification for corporate survival, stability or growth purpose. For successful diversification strategy, company must carry out self appraisal i.e. determining its strengths and weaknesses in terms of personnel, production, markets, policies, costs and profits. It is necessary to lay out objectives of diversification like acquiring desired market share, or utilizing idle plant capacity etc. Opportunities for diversification should be measured against objectives. It will involve analyzing the strategy in terms of sales, cost, cash flow or receivables. On getting positive indications, the company should decide about horizontal, vertical or lateral diversification depending upon the long term sales objectives.

Branding: Brand means a name, number, symbol or design used to create identification of the product. When a brand receives legal protection enabling producer to make its exclusive use, it is termed as trade mark. Branding means giving name or symbol to a product so as to enable consumer to distinguish it from other similar products. Branding helps in popularizing the productions. Mass advertising media plays an important role in creating popularity of certain products among consumers. However, to survive in market, producers should provide quality in branded goods. Further it is necessary that brand name should be attractive, suggestive and easy to spell and remember. Branding can be done by giving special names to the product like Dalda Ghee, Dove Shampoo or by using names of manufacturers such as LG refrigerators, Bata Shoes etc. The marketers can opt from different brand strategies like multibrand product strategy, single brand strategy, distributors’ brand strategy or mixed brand strategy for branding the product.

Packaging: Goods may get damaged during transportation or they may be damaged in warehouses. Goods are packed in suitable containers so as to protect them from leakage, spoilage or breakage. Packing means to wrap or fill goods with the purpose of their protection and convenient handling. It will also increase their durability. Package means specially designed wrapper, container or case which is used for packing goods. It gives identity to the product. Packaging refers to putting goods in convenient sized lots like bottles, jars, cans, bags etc. It will help in making goods familiar with consumers. Packaging facilitates branding and advertising of goods. The marketers have to formulate packaging policies and strategies. For this, first of all, packaging concept should be developed i.e. description of package and its functions and then package should be developed by taking in account consumer requirements, retailers requirements, protection of product and cost involved. Different packaging policies are in existence such as periodic packaging changes, family packaging, re-use packaging, multiple packaging or ecological packaging. Marketers have to select appropriate packaging policy to fulfil marketing objectives.

Product labelling: Labels are fixed to products to describe their quantity, quality, ingredients, and other features. Labelling is compulsory by the manufacturers in case of drug, cosmetics and food items. They are required to give their name, date and place of manufacture, expiry date and batch number.

After-sale services: Manufacturers of machines, instruments, equipments, gadgets etc. have to frame service policy to chalk out the plan for servicing such products after sale. It is to be decided that who will provide after sale service i.e. manufacturer, wholesaler, dealer or distributor. If after sale services are to be provided by middlemen, then they are to be trained properly.

Apart from focusing on above mentioned variables, marketing managers should fulfil social obligations while offering the products to consumers such as optimum use of resources; better quality of life; long term satisfaction of the consumers; safety to users; complete fulfilment of government regulations regarding packaging, labeling, composition, and pricing of product; and eco- friendly concern.

3.2 Price

Pricing is the act of determining product value in monetary terms before it is offered for sale. Prices are generally determined by market forces. Still marketers make efforts to determine price as per objectives of pricing and cost considerations. The price mix decisions extend to the following areas:

Ascertaining appropriate price i.e. right price.
Pricing methods, policies and strategies.
Discounts, margins, rebates.
Terms of delivery and mode of payment.
Credit policy.
Resale price maintenance.

The prices of products are fixed according to the objectives to be achieved through pricing. The various pricing objectives can be profit maximization, achieving a target rate of return on investment, securing a large market share, facing competition or mobilizing resources for expansion of firm.

For ascertaining the appropriate price, the marketers usually consider the cost of production, practices and prices prevailing in the industry, government regulations, arrangements with foreign collaborations, probable competitive reaction, interactive role of other components of marketing mix and estimated sales.

The marketers make selection of best suitable method for fixing price of product.

There are various methods of pricing such as:

a) Cost based method: In this method, cost of production serves as base for price determination. Management adds some amount called as mark up to this cost. This mark up is a certain percentage of cost. The cost can be taken as total cost or incremental cost.

b) Demand based method: Under this method, prices are determined on the basis of demand. The management can fix price which the buyer can pay or it can determine it on the basis of historical demand data available in company records or even test marketing can be resorted to before fixing actual price.

c) Cost and Demand based method: This method uses both cost and demand factors to determine price. Usually break even analysis is done to fix price so as to cover cost and earn some profit.

d) Competition based method: In this method, price is determined on the basis of price being charged by competitors. It may be fixed little high or low than the price of competitors.

e) Customer’s perception of value pricing: This method refers to determining price on the basis of consumers’ perceptions of the value of product. Here, the consideration is the relationship of benefit to cost. The argument in the support of this method is that the consumer will buy the product if value obtained from the product is more than the cost incurred. Hence, the management will have to understand total use of the product, analyze the benefits and cost variables and then make cost benefit trade offs.

The marketers have not only to select the suitable method for pricing, they are also required to choose the best pricing strategy depending upon the stages of product life cycle. There are various pricing strategies such as skimming pricing strategy, penetrating pricing strategy, pre-emptive and extinctive pricing strategy.

It is important to mention that the pricing decisions are taken within the framework of guidelines provided under pricing policies of the company. There are various pricing policies open to the marketers which are described as below:

a) Geographical price policies: It means charging different prices depending upon the location of customers and associated varying transportation cost.

b) Price variation policies: In this, company tries to vary prices with a purpose to match them with marketing needs. There can be variable price policy (price differ from buyer to buyer) or non variable price policy(price differs from class of buyers to other class of buyers but within class remains same).

c) Price differentials policies: Under this policy, actual price charged is less than the quoted price and difference is termed as price differentiation. Price differentials are the tactics used by the marketers to meet competitive pressures, to allow incentives to buy or to achieve specific financial objectives. The price differentials are usually designed in following forms:

Discounts: These are allowed to buyers as a result of specific services provided by them or meeting managerial expectations. These can be categorized as:

Trade discount
Quantity discount
Cash discount.

Trade discount is allowed as deduction from quoted price to buyers occupying specific position in distribution channels like wholesalers, retailers.

Quantity discount is allowed to all the buyers as a result of purchasing a specific quantity of goods. They get deduction from quoted price.

Cash discount is allowed to the buyers who pay the price within a stipulated time. They get deduction from invoice price i.e. quoted price-rebate-trade or quantity discount.

Rebates: These are allowed to buyer by way of deduction from quoted price to accommodate various claims of buyers like defective deliveries of goods , delay in transit etc.

d) Leader price policy: In this, firm sets its price to act as leader in the market. It can happen only when firm is established and deals in highly standardized products like steel, cement etc.

Pricing plays an important role in marketing. It regulates demand of firms’ product or services, acts as a competitive weapon and determines profitability. Therefore, a correct pricing decision is of utmost importance. Appropriate pricing policies or strategies should be followed by the marketers depending upon the marketing requirements and company pricing objectives.

There is need of framing clear cut policies regarding terms of delivery i.e, quantity, time, place and conditions of delivery. Credit terms are also required to be determined by keeping in mind the nature of product, cost involved, credit facilities provided by bank and competitors’ terms. Further , decisions regarding resale price maintenance may be taken to prevent excessive price cuttings by wholesalers and retailers.

3.3 Place (Distribution)

Distribution means using external and/or internal sources for effective movement of goods and services and performing various activities like transport, warehousing, inventory management and packaging to achieve marketing goals of the firm. Effective distribution creates time, place and possession utilities in products and delivers high level of customer satisfaction at less cost. It increases sales, provides smooth flow of goods and reduces order processing and material handling cost.

The distribution mix involves the following variables:

Channels of distribution decisions
Order processing
Inventory level
Warehousing decisions
Product handling decisions
Transportation decisions

Channels of distribution: The companies can use different intermediaries to sell their products or it can directly sell to customers. The decision regarding the selection of channel structure will depend on various factors such as: type, value and usage of product; product positioning required; size of market; financial strength; infrastructural facilities; image and services of intermediaries; degree of desired contol over channel; promotional activities of company; reputation and size of company; preferences of competitor for distribution system; marketing environment; and distribution intensity required (intensive distribution, selective distribution or extensive distribution). Decision are required to be taken about number of wholesalers, retailers, dealers, distributors; franchising and legal issues associated with it. It will require a detailed distribution survey.

Order Processing : Order processing refers to receiving, recording and assembling the products for dispatch. It is necessary that the time gap between receipt of order and dispatch of order is kept reasonable and short as far as possible. Marketing manager has to devise standard procedure for handling orders which may also relate to invoicing, collection of accounts and grant of credit.

Inventory level: Inventory act as a link between customer’s orders and company’s production activity. There is a need to maintain an adequate inventory level. The size of inventory is determined by keeping in mind market demand and inventory cost. However the optimum size is also decided by considering responsiveness of distribution system and desired level of customer service. The firm decides the maximum stock level and minimum stock level. Maximum stock level will help in meeting sudden rise in demand whereas minimum stock level will point out the need to replenish the stock and avoid in running out of stock position. Hence, inventory control is exercised to avoid (i) out of stock position and (ii) piling up a large undesired stock.

Warehousing: Warehousing creates time utility in goods and stabilizes prices by regulating supplies as per changing market demand. Goods are stored in warehouses till they are demanded. There are private warehouses which are owned by the users as well as public warehouses which are owned and controlled by others. Public warehouses charge commission or fee for providing storage space and performing warehousing functions.

Each firm requires a certain number of warehouses to provide desire level of customer service. However it has to keep in mind that physical distribution cost does not raise beyond a limit.

Now a days, a full service warehouse called as distribution centre is becoming popular. Distribution centre serves a regional market. It makes use of computer and latest sophisticated material handling equipments for processing, material handling and inventory control.

A firm can establish one distribution centre in one region where market for its goods exists. It will facilitate order taking, order filling and delivery of goods directly to the customers through an integrated system. The centralized accounting system will help in quick dispatching of invoices and ensuring earlier payments.

Thus, marketers need to decide about type, location and number of warehouses. A wise decision will help in saving time and cost of delivery.

Product handling: During warehousing and transportation, there is need of product handling. Product handling can be manual or mechanical. Now automated product handling devices are available and marketers can use these modern devices. New techniques of packaging like containerization lead to considerable cost reduction. Containerization means packing and transporting of good in standard sized containers.

Product handling devices have appreciably speeded up the order processing as well as movement of consignments. The sophisticated product handling devices and protective packaging have led to better customer service and lower physical distribution costs.

The marketing manager of a firm has to decide about the material handling method i.e. to use manual handling or mechanized handling after considering some factors like (i) nature of product like fragile products which need to be moved by mechanical methods for safety (ii) fund availability (iii) operational cost involved as it will be high for mechanized methods if volume of product movement is not sufficient, and (iv) plant layout

Marketing manager should assess the relative merits and demerits of both methods and make choice of method or combination of method. However, company’s product handling needs should primarily be assessed.

Transportation : Warehousing and transportation constitute major activities in whole distribution system. Physical distribution involves storage of goods at different places which are interconnected by transport links. Goods need to be transported from the place of supply to the place of demand . This consumes time and cost. Product handling cost can be reduced by reducing the number of times goods are handled and also by shortening the time for each handling during transportation.

There are various modes of transport like waterways, roadways, railways, airplanes & pipelines. Marketing manager has to decide the mode/ modes of transport. Decisions regarding mode of transport are primarily based on size and nature of inventory as well as location of warehouse. Apart from this, certain other factors are also considered such as speed, availability, frequency of services, operational cost, dependability and safety of modes of transport. It is preferable to assign weight to different factors to facilitate selection of mode.

3.4 Promotion

Promotion is a process of marketing communication which attempts to inform, persuade and remind its target markets, through personal and impersonal means, about company and its brand. Once product has been decided, its price determined and distribution structure decided, it becomes necessary to make customer aware of the product. There is need to promote the product and for this various means are available. Promotion mix consists of a group of communication tools which marketing executives use to communicate with their target audience. The marketer tries to create a most favourable blend of all promotion elements to influence buyer’s behaviour and his process of decision making. Sales can be promoted through an effective promotion mix.

Advertising, sales promotion, personal selling, public relations are important elements of promotion mix.

Advertising : Advertising is paid form of communication of goods, services or ideas by an identified sponsor which is directed at mass audience. Magazines, newspapers, radio, television, posters, hoardings, direct mail are different media used by advertisers to influence and induce the viewers, readers or listeners to buy the advertised products. Choosing a right media, to convey message and persuade target audience to buy product or services, is a difficult task. Marketers select media by considering (i) communication requirements (ii) advertising budget (iii) nature of the product (iv) extent of competition (v) geographical area coverage requirements (vi) literacy level of target group (vii) cost of media and services provided.

Sales Promotion: Sales promotion refers to short term special selling efforts to accelerate sales. It is a promotional activity which provides monetary and non-monetary incentives to spark an immediate reaction from target consumers (consumer sales promotion) and dealers or firm’s salesperson (Trade promotions). Consumer Sales promotion pull a product or service by stimulating demand and trade promotions push a product or service by arousing enthusiasm among channel members to sell more of a particular brand. Dealer contests, price reduction, free gifts, retail outlet displays are important sales promotion tools. Sales promotion influences purchase behaviour and provides immediate incentive to buy. Sales promotion tools provide marvellous results when supported by advertising and personal selling.

Personal Selling: Personal selling refers to direct personal contact between a sales representative and one or more prospective customers to influence the customer in a purchase situation. It involves securing information about buyer’s unsatisfied needs and wants by the salesman and supplying information about goods and services to the prospective buyer. Sales talk and product demonstrations play an important role in personal selling.

Public relations and Publicity: Public relations and publicity aims at protecting and promoting company’s image through number of programmes and activities. Publicity and public relations increase effectiveness of promotion as consumers are now more interested in evaluating company brand or product on the basis of what is written about it in the media.

Marketing manager has to decide the appropriate combination of various promotion tools i.e. effective promotion mix. This decision depends on the marketing objectives and certain other factors such as nature of product; sex, age and background of target market; stage of product in life cycle; availability of funds; type of buying decisions and push or pull promotion strategy.

For effective promotion, it is necessary that promotion strategy should be intelligently formulated and must pass through various stages such as: identifying the target, determining the objectives, designing the promotion message, selecting appropriate channel of promotion and establishing the promotion budget.

The above discussion has highlighted the various elements of marketing mix and their related strategies. The marketer can manipulate these elements of marketing mix and evolve the specific marketing programme for the product in a given environment. The appropriate marketing mix will require the right combination of four Ps of marketing mix which will involve the choice of appropriate marketing activities and allocation of marketing efforts to each of them.

It is noteworthy that marketing mix of a company keeps on changing as per changes in customer’s requirements, level of competition and other environmental forces. Different marketing mix is required for different market at different points of time. Therefore, marketing manager should keep evolving such marketing mix that will fit in dynamic marketing environment to the best interest of firm and customers.

Summary

Marketing mix means the combination of firm’s inputs which form the core of its marketing system or programme i.e. the product, the price structure, the distribution system and the promotional activities. The marketer adjusts his marketing programs as per the external forces so as to develop a mix or programme that can achieve marketing objectives.

The term marketing mix has been popularized by the marketing experts in terms of four P’s and accordingly the elements of marketing mix has been classified as (i) Product (ii) Price (iii) Place (Distribution) (iv) Promotion. Each element of marketing mix comprises of certain sub variables.

Product is the starting point of all marketing operations. It is bundle of satisfaction than physical object only. Marketing managers are required to take crucial decisions regarding the product of the company so that it will be accepted by the target market. The product mix includes various variables such as: (i) Product quality, features, design, colour, size, line and range (ii) Diversification and simplification of product lines (iii) New product policy (iv) Branding, packaging, labelling and (v) After sales services.

Price of the product, is the most important constituent of marketing mix. The term price can be defined as the monetary considerations asked for or exchanged for a specific unit of goods or services offering some utility. Pricing is the act of determining product value in monetary terms before it is offered for sale. The price mix decisions extend to various areas such as : ascertaining appropriate price i.e. right price, pricing methods, policies and strategies, discounts, margins, rebates, terms of delivery, credit policy and resale price maintenance.

Place (Distribution) means using external and/or internal sources for effective movement of goods and services and performing various activities to achieve marketing goals of the firm. The distribution mix involves various variables such as channels of distribution decisions, order processing, inventory level, warehousing decisions, product handling decisions and transportation decisions.

Promotion is a process of marketing communication which attempts to inform, persuade and remind its target markets, through personal and impersonal means, about company and its brand. Promotion mix consists of a group of communication tools which marketing executives use to communicate with their target audience. Advertising, sales promotion, personal selling, public relations are important elements of promotion mix. The marketer tries to create a most favourable blend of all promotion elements to influence buyer’s behaviour and his process of decision making.

The marketer can manipulate various elements of marketing mix and evolve the specific marketing programme for the product in a given environment. The appropriate marketing mix will require the right combination of four Ps of marketing mix which will involve the choice of appropriate marketing activities and allocation of marketing efforts to each of them.

Learn More

Few important sources to learn more about Marketing Mix:

Bearden, Ingram, Laforge (1995). Marketing: Principles and Perspectives, Irwin Inc.
Dalrymple and Parsons. Marketing Management: Text and Cases, 6th Edition, John Wiley & Sons, Inc. Cannon, Tom. Basic Marketing: Principles and Practice, 3rd Edition, A.I.T.B.S. Publishers, Delhi.
Davar S. Rustom, Davar R.Sohrab, Davar R.Nusli (2000). Salesmanship and Publicity, Vikas Publishing House Pvt. Ltd., New Delhi.
Gandhi,C J (1998). Marketing-A Managerial Introduction, Tata McGraw Hill, New Delhi
Kotler, Philip (2002). Framework for Marketing Management, Pearson Education (Singapore) Pte. Ltd., Indian Branch, Delhi.
Still, Cundiff and Govoni. Sales Management: Decisions, Strategies and Cases, 5th Edition, Prentice Hall of India Private Limited, New Delhi.

https://www.extension.purdue.edu/extmedia/ec/ec-730.pdf
http://www.yourarticlelibrary.com/marketing/marketing-mix-product-price-place-and-promotion-4ps/5395/

Points to Ponder

‘Marketing mix’ means the combination of firm’s inputs which form the core of its marketing system.
The term marketing mix has been popularized by the marketing experts in terms of four Ps i.e. Product, Price, Place (Distribution) and Promotion.
The marketer can manipulate various elements of marketing mix and evolve the specific marketing programme for the product in a given environment.
Different marketing mix is required for different market at different points of time.